The Coal India board has taken two decisions aimed at boosting coal offtake of the non-regulated sector comprising steel, sponge iron, cement, captive power producers and independent power producers.

Coal offtake of the non-regulated sector was 73 million tonnes in 2018-19 under the fuel supply agreement of 12 per cent of the total offtake of 608 million tonnes. In the first eight months of the ongoing financial year, coal offtake at 363.63 mt was down 7.2 per cent over the corresponding previous period.

First, the public sector miner has extended the ‘letter of credit’ facility for coal supplies to these customers through rail routes under a fuel supply agreement through linkage auctions.

Earlier, customers in the non-regulated segment had to deposit money upfront against the coal value to be developed by the rail route. This system locked up working capital that could be otherwise used by these firms.

“Now, these customers need not have to pay 100 per cent advance payment by blocking their money for long periods and will be able to run their operations smoothly,” said a Coal India official.

He added that this facility was earlier applicable for power producers only and has now been extended to others in a bid to make it easier for customers to procure coal and push up sales.

Inter-plant transfer

The second step involves allowing inter-plant transfer of coal of the independent power producers. This was earlier allowed only for central and state government-owned power generating companies. But, there is a rider. The plant has to be of a wholly owned subsidiary of the company or should be wholly owned by a common holding company.

The transferee plant would also have to provide an affidavit to Coal India affirming that the additional supply beyond the annual contracted quantity shall only be used for generating power for distribution under long term power purchase agreements with power distribution companies.

“If an independent power producer owns two different plants and has two separate FSAs in place, they can supply coal from one plant to another owned by them, to improve the efficiency of generation and reduce the cost of coal,” the official said. This would reduce the coal cost and take the load off railways during the peak season.

Independent power producers have welcomed the move as it would allow them to strategically procure coal depending upon the location of the plant and the demand without worrying about the inventory. But cost of transferring the coal from one plant to another would now shift to the power producers themselves.